McCormick sales surge 19% as consumers hunger for flavor

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Dive Brief:

McCormick & Co. said operating income was $192 million in the second quarter, slightly topping forecasts, compared to $133 million in the year-ago period. Sales during the period rose 19% to $1.33 billion from $1.11 billion during the same period in 2017.

The spice and flavor maker said sales in its consumer segment rose 20% during the second quarter, while in the Americas they jumped 23%. Much of the growth came following its purchase last summer of ReckittBenckiser's Food Division for $4.2 billion, which allowed it to add the iconic French's mustard and Frank's RedHot brands to its portfolio. Its flavor solutions segment recorded an 18% increase in sales, including 23% in the Americas, as it also benefited from the French's and Frank's purchase.

"McCormick is a global leader in flavor with a broad and advantaged global portfolio which continues to grow and position us to fully meet the demand for flavor around the world," Lawrence Kurzius, McCormick's CEO, said in a statement. " All over the world, people desire great tasting foods and drinks with rich, authentic flavor."

Dive Insight:

In what has become standard for McCormick, the 129-year old manufacturer of spices, seasoning mixes, flavorings and condiments produced another solid quarter that highlights its favorable position in the CPG space. It posted strong results in both sales to consumers and larger businesses that use its products, underscoring McCormick's widespread reach.

While other Big Food companies struggle to keep pace with changing consumer behaviors and a move away from packaged products in favor of fresher, clean label and better-for-you items, consumer demand for flavorful food holds steady. In addition, a growing number of people, especially millennials, are experimenting with new flavors, trends that benefit McCormick and other taste-making companies. A Mintel study found that 80% of millennials are interested in more spicy flavors from peppers and chilies in their food, for example.

"Consumer demand for flavor seems to be endless," Kurzius told Food Dive at the annual Consumer Analyst Group of New York conference in Florida last February. "Take the whole perimeter of the store and it's our products and our categories that make that perimeter taste good. There is a tailwind for us, for most of the center of the store there is a headwind.”

McCormick reiterated Thursday that it expects to grow sales 13% to 15% compared to 2017. Sales growth is expected to include the incremental impact of pricing from 2017 in addition to actions taken in 2018, the company said. It also plans to achieve at least $105 million in cost savings that it would use to improve margins, fund an increase in brand marketing and offset increased costs.

After last year's purchase of French's mustard and Frank's RedHot brands, some analysts speculated the company had overpaid, but so far the products continue to perform well. Sales from the acquired Frank's and French's brands added 13% to the sales increase, McCormick estimated. "Across both of our segments, the solid growth from our core business and the performance of Frank's and French's were in line with our plans and we are pleased with our momentum entering the second half of the year," Kurzius said.

McCormick's outlook remains bright in part because of its positioning as a flavor company, but also its efforts to expand its presence in products available in the perimeter of store and to new meal occasions, such as breakfast. Earlier this year, it launched a line of products to flavor yogurt, eggs, smoothies, oatmeal and other healthy items.